Collaborating with another firm and not sharing in the resulting revenue may seem counterintuitive, yet many large companies are doing it with positive results. Toyota Motor Corp.is assembling automobiles with General Motors Co.. Banks are lend money alongside private equity firms to high growth companies. This level of collaboration is recognized for the improvement it brings to the strength of one or both businesses.
Canada’s 13 oil sands companies, which represent 95 per cent of production, agreed in 2012 to put aside IP issues and collaborate over technologies to deal with environmental priorities around water, greenhouse gases and tailings. At first, the lawyers said it would be impossible, but they have now formalized an agreement and the companies formed a group called the Canadian Oil Sands Innovators Alliance (COSIA). The mutual business benefit is obvious.
Then there are the less formalized, fluid relationships, where both companies recognize each company’s talents and are inspired to share ideas.
Satish Kanwar, co-founder and CEO of design agency Jet Cooper, describes how his company’s relationship developed with e-commerce platform Shopify. “We were not competitors. Jet Cooper provided specialized services and Shopify supplied an industry-leading software product. We had shared expertise in retail, but with a different set of skills.”
Shopify has a software product to build online retail stores with a design level for small companies looking to open online stores. Jet Cooper had deep design skills and served sophisticated retail corporate clients.
Both companies helped customers who wanted to set up online stores. They both provided online designs to their retail clients. Kanwar described their history. “The difference was that we provided custom one-to-one services and Shopify a scalable software product. While different value propositions, they also went hand-in-hand.”
Being open to conversations and discussions was one of the factors that made it easier for Shopify to look at acquiring Jet Cooper. As the smaller firm with a team of 25 developers and designers, Mr. Kanwar could have seen the relationship imbalance as a risk. Instead, Jet Cooper saw their combined market as global, with plenty of room for the companies to flourish as one. By collaborating, it helped them compete in a different form against other competitors. It also led to a fast and dynamic acquisition.
Collaboration is the new mind set. It can be formalized as a strategic acquisition, or it can be a low key sharing of knowledge and industry connections. Whatever form it takes, here are a few questions to ask to begin to see the potential of collaboration:
Will the consumer be happier with the final result?
Serve the customer’s interests first and the incoming revenues will demonstrate the value of the collaboration. Canon supplies photocopiers to Kodak, and both companies enjoy improved sales.
Will collaboration strengthen the two companies against outsiders?
It takes a great deal of money and time to develop new skills for new markets. Jet Cooper was already designing for high end, corporate clients such as Metro News, Cineplex and Sobeys, and able to deliver the quality requirements for high level design to a retail market. Shopify developed the technology tools to set up online stores. Together, the two companies could deliver, as Kanwar describes it, “more and better” to a larger market.
Can the core competencies be protected?
Jet Cooper was founded on design and had honed their competence working for highly branded, significant companies who understood how to use design to enhance their clients’ experiences. This gave Jet Cooper the edge in knowing what drives great design for brands. Design was an important competency for Shopify to continue to grow.
Is there a similar culture?
Collaboration has it risks where one company can ruthlessly exploit the other with only their own gain in mind. Jet Cooper’s culture was one of sharing knowledge even across company boundaries. The collaboration meant that Jet Cooper was familiar and comfortable integrating with other teams. When conversations began about a potential acquisition, this made the final decision that much easier.
Could there be a potential acquisition or merger?
It takes a great deal of money, time and risk to grow new markets. Shopify spotted Jet Cooper’s special set of design skills and their experience with a different type of customer. Together with Jet Cooper, Shopify’s competencies would bring a wider quality of service offering to a larger online, global marketplace making their combined value difficult to beat.
Once the acquisition of Jet Cooper was signed, Mr. Kanwar was immediately trusted as director of operations for the Toronto office, giving a strong start to the new roadmap.
Jacoline Loewen is a director at Crosbie & Company, which focuses on succession advice for medium-sized enterprises, family businesses and closely held private companies. Crosbie develops customized strategies, particularly in relation to sale of companies, M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen and @crosbiecompany.